Murphy CEO: Exploration Program Off To Slow Start In 2011

HOUSTON — Murphy Oil Corp. Chief Executive David Wood said Thursday that the integrated oil company’s exploration program is off to a slow start this year but activity should ramp up in the second half of the year.

So far this year only two exploratory wells have been drilled to their full depth and one of those, off Indonesia, will be written off as a dry hole, Wood said.

As more rigs become available to the El Dorado, Ark., company, however, “we should see a much more active program in the second half of the year with significant targets being tested in several countries,” Wood said. This year and next Murphy plans to drill 30 wells to evaluate prospects in Brunei, Iraq, off the Congo and Indonesia, Wood said.

U.S. permitting delays will likely mean that Murphy will not be able to begin work on its Thunder Horse prospect in the Gulf of Mexico’s deep waters, he told investors on a conference call to discuss the company’s second-quarter earnings.

Murphy reported earnings of $311.6 million, or $1.60 a share, up from $272.3 million, or $1.41 a share, a year earlier. In May, the company forecast earnings of $1.50 a share to $1.80.

Revenue climbed 56%, to $8.72 billion, easily topping the $8.1 billion forecast by analysts.

But shares fell, recently trading 4.89% lower at $63.65, after the company came up short of its own production goals.

Average daily production for the quarter–the equivalent of 170,457 barrels of oil–came in well below expectations of 187,000 barrels amid a host of problems at various basins. As a result, Murphy trimmed its full-year production forecast to the equivalent of 185,000 barrels of oil per day, down from earlier estimates of 200,000 barrels.

“This is disappointing for us and we have reorganized our upstream business and processes to do a better job of meeting and beating production targets,” Wood said.

Wood said he remains “focused and comfortable” with Murphy’s goal of increasing production to the equivalent of 300,000 barrels per day by 2015.

Wood also said that Murphy’s efforts to shed its refining business were moving slower than he would like, but the pace was “understandable considering the market.”

Murphy said Monday that it would sell its 45,000-barrel-a-day Superior, Wis., refinery to Calumet Specialty Products Partners LP for $214 million plus the value of facility’s hydrocarbon inventory, which is estimated to be about $260 million.

Wood said he expects to announce a sale of Murphy’s only other U.S. refinery, in Meraux, La., during the current quarter. He also said that Murphy would split its refinery in Milford Haven, Wales, from its United Kingdom retail businesses to accommodate potential buyers who are interested in each separately.

-John Kell contributed to this article.

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